Loss-making state-owned enterprises borrowed 142.3 billion rupees this year

The rise in the cost of money has failed to stem the flow of credit to loss-making public sector enterprises (PSEs).

The policy rate of 20% prevented investors from entering new businesses and increased domestic debt servicing of the government.

But loss-making state-owned enterprises are currently slowing the economy and taking unprecedented amounts from banks. According to the latest data released by the National Bank of Pakistan, lending to state-owned enterprises reached 142.3 billion rupees in the first eight months (July-February) of the fiscal year.

This is surprising as loans to public sector companies were only Rs 2.5 crore during the same period last year. The government announced austerity measures earlier this year to cut costs, but so far no plan has been drawn up to eliminate PSE’s losses or deficits.

The amount of loans to SOEs this year is surprising, as last year there were no loans. Instead, net withdrawals were reported at 43.3 billion rupees. The net withdrawal for the financial year 2020-21 amounted to Rs 53.77 billion.

In an effort to generate more revenue, the government has increased taxes on petroleum products, food, and many other products, as well as raising general taxes to 18 percent.

Inflation of 30% has increased the price of every item sold in the market, thereby generating the most revenue through GST. The higher the cost price of the product, the higher the government’s income.

However, public institutions with budget deficits have been neglected in this regard, with their debts and liabilities reaching Rs 1,972 billion by the end of December 2022, an increase of Rs 187 crore in a year. PSE’s debt alone increased from Rs 134.9 billion to Rs 1,474.3 billion in the first half of the financial year.

Pakistan International Airlines (PIA) was the largest borrower at Rs 186.6 billion by the end of December, according to the state bank’s first six-monthly report. Such a huge balance of PIA’s domestic debt was important to the economy.

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